Keurig Dr Pepper Snapple merger could be a restorative jolt for K-cups

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Dive Brief:

The Dr Pepper Snapple Group Inc. and Keurig Green Mountain merger, announced Monday, could help the latter with slowing growth of their K-cups, according to an article on Market Watch.

K-cups' price and environmental impact have been two of the biggest complaints consumers have lodged for why they're cooling on the coffee pods. This merger could allow Keurig Green Mountain to tap into its partner's better distribution and production abilities to address these concerns.

According to Euromonitor, coffee pods experienced average annual growth rate of 18% between 2011 and 2016. However, it has since dropped to single digit growth.

Dive Insight:

In recent years, concerns have been raised about the environmental impact of the pods and the high cost of brewing morning coffee with a K-cup, as opposed to a traditional coffee maker. By accessing the Dr Pepper Snapple Group's resources and distribution network, Keurig may be able to address these concerns more quickly.

The picture is far from bleak. Rather, the initial enthusiasm has waned. Growth is expected to be around 5% annually by 2021, acccording to Euromonitor. Despite this, pods remain the fastest growing category, not only with coffee, but hot drinks in general.

Price has long been a deterrent for some shoppers. Most Keurig and Starbucks branded pods for sale at Target average roughly 60 to 70 cents when bought in an 18 pack. While this is more expensive per cup than brewing a pot of coffee, it is still cheaper than buying a cup at a coffee house. The price drops on Amazon. San Francisco Bay Gourmet Coffee offers pods for 35 cents a piece. If Keurig can use it's new partnership to produce and distribute pods at a cheaper price point, consumer interest would likely increase.

When it comes to the environmental impact, Keurig could use its new partners resources to speed up its timetable to having 100% recyclable K-cups. Currently, there are some recyclable pods available, but the complete conversion isn't expected until the end of 2020.

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